An employee who is fired without just cause is entitled to reasonable notice of termination or severance pay instead of that notice. Determining how much severance an employee is entitled to depends on several factors including legislation, the common law, and any contractual terms that may apply.
Minimum Standards
Each province and territory has employment standards legislation that states a minimum amount of notice or pay in lieu of notice that an employer must provide. In British Columbia, for example, the Employment Standards Act (ESA) provides one weeks’ termination notice after three months of service, increasing up to eight weeks after eight years of service.
When an employer terminates 50 or more employees at a single location within a two month period, the ESA’s group termination provisions apply. These provisions require the employer to provide written notice to the Minister of Labour and to the affected employees, ranging from 8 weeks’ notice if 50 to 100 employees are affected to 16 weeks’ notice if 301 or more employees are affected. The ESA group termination requirements are in addition to the employer’s liability, if any, under the individual termination provisions.
Alberta’s legislation that sets out minimum termination notice periods is the Employment Standards Code (the “Alberta ESC”). These provisions entitle an employee to anywhere from one week notice after 90 days of service to eight weeks’ notice after ten years of service. Like the ESA, the Alberta ESC also contains provisions that apply when 50 or more employees are terminated at a single location within a four week period.
The employment standards termination provisions are statutory entitlements. An employee is not required to sign a release in order to obtain them.
These statutory notice periods represent minimum entitlements. Unless a valid employment contract limits that entitlement, many employees, particularly those with longer service, senior positions, or difficulty finding comparable employment, are entitled to significantly more notice or compensation under the common law. Common law entitlements can be as much as two years’ severance and in some circumstances, potentially even more.
Beyond the Minimum: Common Law “Reasonable Notice”
Assuming an employment contract does not limit the employee’s notice period to the statutory minimums, the courts will determine the amount of reasonable notice of dismissal that the employee is entitled to at common law. This is typically done by applying the factors articulated in Bardal v. Globe & Mail Ltd. Those factors include:
- the employee’s length of service
- age
- character of employment (such as managerial or specialized roles)
- the availability of comparable employment given the employee’s skills and experience
The idea underlying the common law notice period is that the employee requires a period of time within which to search for comparable employment. Notice periods often range from several months to approximately two years and in specific circumstances, potentially more.
The employee’s common law severance is the total amount the employee would have earned had she/he continued working throughout the notice period. This includes not only salary, but all perks and other entitlements such as bonuses and other incentives.
Contractual Terms
An employment contract may include a termination clause that limits notice. Usually, the contract attempts to limit the employee’s entitlements to the amount stated in employment standards legislation. If the contract is enforceable, it will govern and will remove the employee’s entitlements at common law.
However, not all such clauses are enforceable. An employment contract that does not contain an enforceable termination clause does not supplant the employee’s right to common law notice.
No “Rule of Thumb”
There is no fixed formula or “rule of thumb” for calculating severance in Canada. Some people refer to one month of notice per year of service as a guideline. However, courts have repeatedly rejected a rule of thumb for determining the notice period. Rather, each case turns on its own facts.
A senior professional with short service might be entitled to many months’ notice, while an employee with longer service in a readily replaceable role might have a shorter notice period.
Additional Considerations
Other considerations may also affect an employee’s severance pay entitlement. For example, if the employer induced the employee to leave secure employment, this may increase the employee’s severance pay entitlement.
Conversely, if the employer can prove that the employee did not make reasonable efforts to find comparable work (known as “mitigation”), this may reduce the employee’s severance entitlement.
Key Takeaways
Employment standards legislation provides a floor, not a ceiling, to an employee’s severance entitlement for a without cause dismissal. The amount of severance pay an employee is entitled to depends on the employee’s circumstances and the surrounding facts.
Employees should seek legal advice before signing a release or accepting a severance offer. Employers should obtain advice before making a decision to end someone’s employment.
This article is for general informational purposes only, does not constitute legal advice, and is not directed at any particular client or case. The views expressed herein are based on current law, specific facts and available information and may not be applicable to your specific situation or to any matter on which we may act. You should not rely on this material in place of consulting a qualified lawyer about your own situation.
